Hi,
1-You never have to insert the present position in the waypoint 0.
When the ramp position has been inserted automatically the same position is set as Waypoint zero.When the plane starts to navigate, automatically the waypoint 0 will be updated and always, during the flight, the waypoint 0 is the present position.It isn't possible to correct your error.In this case the INS feel the position difference and red WARN light with error codes will come out.
2-I don't know your plane so I don't know what is AUX NAV .
3-IF YOUR AUTOPILOT IS STANDARD(not custom one) switching on the
desired NAVMODE swicth the Autopilot will navigate properly following the loaded waypoints.
4-No. You have to choise your desired INS in command and switch on the related NAVMODE switch.
This is a professional gauge you cannot operate without to study the manual otherwise you'll have in the future many other questions to ask.
Gianfranco

I have just installed the INS into my DF727. I have not flown yet with it, but the alignment went without problem. However there is something strange. The two little switches that are used to select the active uint are not switchable. Whatever I do they are always in down position. Is that normal? Aren't they supposed to be switchable? Or are these switches become usable after AP activation?

Yeah, that is correct. After the alignment is complete and I switch the mode selectors to NAV the switches do work!